The shares, which Sam Bankman-Fried and Gary Wang, co-founders of FTX, purchased last year, have been a source of contention ever since FTX failed. Robinhood’s board of directors has now authorized a proposal to buy back that investment. In its fourth-quarter report, released on February 8, Robinhood said that it had obtained board permission to repurchase the shares. Last year, former FTX CEO Sam Bankman-Fried and FTX co-founder Gary Wang invested $578 million in Robinhood.
Robinhood’s relationship with FTX
According to Jason Warnick, chief financial officer of Robinhood, the board has authorized exploring the possibility of acquiring most or all of their shares that Emergent Fidelity Technologies purchased in May 2022. By taking out loans directly from FTX’s sister company, Alameda Research, the FTX co-founders purchased 55 million shares of Robinhood stock via Emergent Fidelity Technologies in May, which are now worth $578 million at current pricing.
The shares at issue have been involved in several legal disputes. On January 9, the 55 million shares, or around 7% of the corporation, were confiscated by the US Department of Justice (DOJ).Bankman-Fried and Wang used the shares as collateral to get a loan from Bitcoin lending site BlockFi, which filed a lawsuit in court to repossess the shares.
Warnick told CNBC on February 8 that while nothing has been formalized yet, Robinhood has been collaborating with the DOJ on a strategy to effectuate the repurchase.
After the exchange went down in November, FTX asked the court on December 23 to stop BlockFi from getting the Robinhood shares. While FTX and other FTX-affiliated firms filed for bankruptcy in November, Emergent Fidelity did not, opting instead to seek bankruptcy protection on February 3.
Q4 report: Robinhood saw a drop in revenue
The cryptocurrency-based transaction revenues from the American trading platform’s “Robinhood Web3 Wallet” dropped 24% to $39 million in the fourth quarter from the third quarter. Comparing the third quarter to the second, revenue decreased by 12%.
In the fourth quarter of 2022, total net sales rose 5% to $380 million. But in 2022, the company disclosed an overall net loss of more than $1 billion. Even though the company was able to give the Robinhood Web3 Wallet to more than 1 million customers who had been waiting, cryptocurrency-related income has gone down.
